Smithfield Crossing Law Blog

Feldman Law Center – A recent New York Times editorial indicates that the Obama honeymoon may be coming to end as the faltering economy continues to eliminate jobs and a tidal wave of foreclosures grows by the month. Through May foreclosure filings reached the one million mark with estimates for the whole of 2009 coming in at 2.4 million. The foreclosure issue, as large as it is presently, could easily exceed the current yearend estimates if job losses stay at their current pace of over 600,000 per month. As it stands, 15.4 homes are currently underwater with mortgage balances that exceed home values. Additionally, 5.4 million homes are currently delinquent or at some stage of the foreclosure process.

The New York Times concludes that “The Obama administration needs to step up its efforts to aid the middle class — or the financial crisis will have no end in sight.” The Times proposes a two part solution to the foreclosure crisis; the first being economic stimulus to stem job losses, an argument that holds obvious merit. Their second proposal concludes that “Loan modification programs that reduce monthly payments may not be effective, because the bigger problem is negative equity.” They fault the administration for building a plan that centers on lower monthly mortgage payments while only recommending principle reductions instead of somehow making them mandatory. The Times also criticizes the administration’s anti-foreclosure plan which was recently gutted by the large banks and mortgage lenders.

The cure-all proposed by The New York Times appears to be focused on principle reductions across the board which would be steep enough to restore some equity to borrowers, giving them additional motivation to stay in their homes and allow them to borrow against their new-found equity should a hardship such as the loss of a job or illness occur.

By the end of the editorial, the Times is calling for home equity to be restored to homeowners, jobs to be added to the economy, and steady paychecks for all. How banks remain solvent, who pays for job stimulus, and how regular pay checks are covered in this grand plan is left for someone else to answer. The Times does get it half right in that it’s fixing the economy that will finally curb the foreclosure crisis. The big questions again are how and how much will it take?

Here’s a list of loan modification do’s and don’ts to help you avoid common pitfalls.

Do know your rights.

More than 80% of mortgage contracts violate one or more lending laws—and most of them go unnoticed. But these violations can be your biggest weapon in the loan modification process. They can give you the leverage you need to negotiate with your lender and stop foreclosure. Your loan modification attorney can help you understand your rights and use them to get the results you want.

Don’t wait too long.

The foreclosure process is designed so that you have time to get back on your feet and save your home. But that doesn’t mean it’s safe to procrastinate. The longer you wait, the harder it gets to get you out of that fix. As soon as you decide you need mortgage help, call for a loan modification help and get started.

Do work with your lawyer.

Your Home Loan Modification doesn’t rest in the hands of your lender, your broker, or your loan modification attorney. These people can help, but you have to do your part and cooperate with your lawyer. Make sure to submit your paperwork on time, answer questions honestly, and give them a clear picture of your financial situation.

Don’t file for bankruptcy, unless you really have to.

Many people think that filing for bankruptcy can help them stop foreclosure. But data from the American Bar Association shows that it doesn’t work that way. In fact, 96% of the people who file bankruptcy end up losing their homes anyway—so they’re left with a foreclosure AND a bankruptcy on their records. In some cases, bankruptcy is still a viable option, but don’t make any decisions without getting professional advice.

Do have a backup plan.

Not all people will qualify for a mortgage loan modification. Maybe you’ve fallen too far behind, your lender may be simply hard to work with, or maybe you don’t need it after all. In any case, it’s always good to have a Plan B. Your mortgage modification attorney can help you find the best solution.

If you can’t get your loan modified, talk to your lawyer about a short sale. This involves selling your home for less than its fair market value and giving the proceeds to your lender. Although you still lose your home, it’s not as damaging to your credit as foreclosure, so it’s easier to get back on your feet.

It is important that you try to avoid going into closure of all costs. There are many legal issues that can arise if you miss payments and allow your home to end up in a foreclosure. Basically how it works is that if you are late for more than four months bank will issue a notice that you need to evict her house within 20 days. The problem is that you have legal rights and in some cases the bank cannot throw you out on the street. You have right into your bank and try to come up with a solution that works for you and your lending institution. During these tough economic times many are facing closure so you need to know your legal rights.

Get Free: Stop Foreclosure Now

Most banks do not want to own your home because they will have to turn around and try to sell it in a down market and this can be very difficult for them. You are always better off to have a good line of communication with your bank so that you can come to terms and save your home from foreclosure. This is one of the worst economic crisis is our country has ever seen and as foreclosures continue to rise most banks want to work out a solution. You should never feel like there is no option for you and you have to do is legally let your house go.

How to: Avoid a Foreclosure

Remember legally when it comes to foreclosure you have a lot of options available for you. You need to have an open line of communication with your banker so you can work out a payment option. Your bank does not want on your house and have to turn around and try to re-sell it. Once you come to an agreement you can stay in your home and continue to make payment and legally the bank will be happy because they will no longer have to worry about your situation and take legal action.